Money-weighted rate of return

Providing greater transparency

There’s a new initiative called the “Client Relationship Model” that is designed to provide investors with greater transparency on their costs and performance. With phase two of this initiative, called “CRM2”, a new annual performance report was introduced at most Canadian investment firms in 2017.

The new annual performance report uses a different way to calculate your rate of return compared to the traditional “time-weighted rate of return” used by most of the financial industry. It’s called a “money-weighted rate of return” and it’s intended to give you insight into your personal rate of return, taking into account your contributions and withdrawals.

The following video explains the difference between these two ways to calculate your rate of return – and why both are helpful.